South Korea Bank Sees Three Paths

The South Korean central bank has issued a paper that claims cryptocurrency like bitcoin may work in conjunction with fiat currency and new digital cryptocurrency issued by the central bank and others.

The paper, “Crowding Out in a Dual Currency Regime? Digital Versus Fiat Currency,” was published earlier this week and created by economists and academics from the Bank of Korea and Seoul’s Hongik University.

“High costs of using fiat currency increase the demand for digital currency,” said the report. “Similarly, high costs of using digital currency relative to fiat currency raise the demand for fiat currency. In a world of imperfect currencies with uncertain costs associated with the use of a currency, it is unlikely that the relative costs of using digital currency will be low enough to drive out and accordingly crowd out fiat currency entirely. Our results rather suggest that the threshold of equating the demand for fiat currency with that for digital currency will allow the co-existence of both currencies.”